Foreign Electronic System Operator (ESOS/PSE) Registration in Indonesia

“Every Electronic System Operator Provider that is operating in Indonesia is obligated to be registered.”

1. Overview of Trade Through Electronic System in Indonesia

Article 1 point (3) of the Ministry of Trade Regulation Number 31 of 2023 concerning Provisions of Business Licensing, Advertising, Development, And Supervision Of Business Actors in Trading through Electronic Systems (“MoT Reg. 31/2023”) defines Electronic System Trading (EST), is trading in which a transaction is conducted through a set of electronic devices and procedures.

Meanwhile, the Business Actor for EST is an individual or a business entity, either incorporated or unincorporated, which may be a domestic business actor or business actor domiciled abroad and those that operate business activities in the EST sector. Such Business actors consist of

1. Merchant, Business Actors that operate EST by using facilities created and managed by themselves directly or through facilities owned by a PPMSE, or other Electronic Systems that provide EST facilities ( Article 1 point 9 MoT Reg. 31/2023);
2. Electronic System Operator (ESO), is a Business Actor that provides electronic communication facilities used for trading transaction ( Article 1 point 10 MoT Reg. 31/2023);
3. Intermediary Service Organizer (ISO), is a Domestic Business Actor or Foreign Business Actor that provides electronic communication facilities other than telecommunications organizers that only function as an intermediary in electronic communications between senders and recipients (Vide. Article 1 point 11 MoT Reg. 31/2023).

2. EST Business Actors

Article 2 MoT Reg. 31/2023 provide details of Business Actors that conducts EST which are:

1. Domestic Business Actors (Indonesian citizen or business entity established and domiciled in the jurisdiction of the Indonesia which operates business activities in the EST Sector), which include:

• Domestic Merchants;
• Domestic ESO;
• Domestic ISO.

2. Foreign Business Actors (foreign citizen or a business entity established and domiciled outside the jurisdiction of Indonesia which operates business activities in the EST sector in the territory of Indonesia), which include:

• Foreign Merchants;
• Foreign ESO;
• Foreign ISO.

Business models of domestic ESO and foreign ESO may be in the form of:

1. Online Retail, Merchant who operates EST through a commercial website or application that is created, managed, and/or owned by themselves;
2. Marketplace, provider of facilities in which part or entire of the transaction process is in an Electronic System in the form of a commercial website or an application as a forum for Merchants to be able to place offers for Goods and/or Services;
3. Online Classified Advertisement, any facility to run an Electronic System in the form of a commercial website or an application that brings together sellers and buyers whose entire transaction process occurs outside the website or application;
4. Price Comparation Platform, any facility to run an Electronic System in the form of a commercial website or an application that displays price comparison for Goods and/or Services sold on other websites or applications;
5. Daily Deal, facility to run an Electronic System in the form of a commercial website or an application in the form of selling discount coupons and/or other convenient facilities that may be used as a means of payment by consumers to purchase Goods and/or Services from other Business Actors;
6. Social-Commerce, social media organizer that provides certain features, menu, and/or facilities that enable Merchants to place offers for Goods and/or Services.

Foreign Investment Business Actors 3. ESOs Registration Procedures

In accordance with the Ministry of Communication and Informatics, Number 5 of 2020 concerning Private Electronic System Provider (“MoCI 5/2020“), Every ESOs provider that is doing business in Indonesia must register their ESOs. The registration will be submitted to the Minister integrated via the “Online Single Submission” (OSS) and will be completed when the ESOs’ Provider has submitted all of the information mentioned above. The outcome of this registration will be the ESOs Provider’s Business Number (NIB). Furthermore, based on MoT Reg. 31/2023, ESO Business Actor shall use the relevant Standard Classification of Indonesian Business Fields / Klasifikasi Baku Lapangan Usaha Indonesia (KBLI) to conduct its business.

In addition, under Article 14 Government Regulation Number 80 of 2019 concerning Sales via Electronic System (“GR 80/2019”), Domestic ESO and/or foreign ESO are required to use an Electronic System that has an Electronic System suitability certificate in accordance with the provisions of statutory regulations.

Depending on the risk evaluation, ESOs providers can do business in Indonesia after they obtained the NIB. In accordance to Article 10 Paragraph (1) and Paragraph (2) of the Government Regulation Number 5 of 2021 (“GR 5/2021“) concerning Licensing of Risk-Based Business Permit, a business can be evaluated into:

1. Business with low risk;
2. Business with medium risk (low-medium or high-medium); and
3. Business with high risk;

The permit needed to do business with each risk classification are as follows:

1. Business with low risk: NIB;
2. Business with medium risk (low-medium): NIB and Standard Certification (in the form of a statement letter from the ESOs provider stating that they will fulfill all requirements);
3. Business with medium risk (high-medium): NIB and Standard Certification (obtained from the central government or state government); and
4. Business with high risk: NIB and Permit (obtained from the central government or state government).

4. Registration Documents for ESOs Provider

In accordance with the Article 3 of the MoT Reg. 31/2023, ESOs Prover is required to register your website / Foreign Electronic System Operator (ESO) via “Pendaftaran Penyelenggara Sistem Elektronik”.

To register ESOs, ESOs providers are required to provide the following information:

1. Regarding the ESOs Provider Company:
   • Principal Office name, domicile, email, phone number, deed of establishment; and
   • and the PIC’s name, passport number, citizenship, gender, place, and date of birth, and address.
2. Regarding the ESOs
   • ESOs name;
   • ESOs sector;
   • Website /. URL;
   • Description of the business model;
   • Full description of the ESOs’ functions;
   • Full description of the ESOs’ business process;
   • ESOs sub-sector;
   • ESOs’ domain system / IP Address;
   • Information on the management location and the processing of the ESOs;
   • Information on the private data processing; and
   • A number of Indonesian users within a year and the nominal transaction value.

Furthermore. the submission of registration application shall be conducted by filling in the registration form that contains correct information regarding

1. General description of the operation of Electronic System;
2. Obligation to ensure information security in accordance with the provisions of laws and regulations;
3. Obligation to perform Personal Data protection in accordance with the provisions of laws and regulations; and
4. Obligation to perform Electronic System feasibility test in accordance with the provisions of laws and regulations.

5. Limitation Activities for the ESOs

Any portals, sites, or application that is connected and can be accessed via the internet are classified as ESOs. Referring to Article 2 Paragraph 2 Letter b of the MoCI 5/2020 juncto. Article 50, Article 32, and Article 60 of the Government Regulation Number 80 of 2019 concerning Sales via Electronic System (“GR 80/2019”), Below is the list of activities that ESOs Provider is allowed do (but are not limited to):

1. Providing, supervising, and/or operating the offering and/or sales of goods and/or services;
2. Providing, supervising, and/or operating financial transaction services;
3. The delivery of paid digital materials or contents through data network by downloading via portals or sites, delivery via electronic mail, or via other applications to the users’ electronic system;
4. Providing, supervising, and/or operating communication service that includes but is not limited to short messages, voice calls, video calls, electronic mail, and chatting in a digital network platform, network services, and social media;
5. Search engine and provider of written, verbal, animation, musical, video, film, and games electronic information or a combination of some and/or all the mentioned above;
6. Private data processing to sustain operational purposes regarding public service related to electronic transactions;
7. The use electronic contracts or other contract methods as a form of an agreement between parties;
8. The use of ads for marketing and promotion purposes; and
9. The use of electronic system for payment purposes (It should be noted that this must be done and practice in accordance with the Bank of Indonesia Regulation Number 22/23/PBI/2020 on Payment System).

In contrast, in accordance to Article 9 paragraph (3) MoCI 5/2020 and the Ministry of Communication and Informatics Circular Letter Number 3 of 2016 concerning the Provision of Application and/or Content Services via Internet, the activities prohibited are as follows:

1. Providing Electronic system that contains illegal electronic information and/or documents;
2. Providing Electronic system that facilitates the spreading of illegal electronic information and/or documents;
3. Providing services that goes against the Pancasila and the 1945 Constitution and is threatening the integrity of the Republic of Indonesia;
4. Providing services that sparks conflicts or opposition between groups, ethnics, religion, race, and between SARA, insults, harasses, and/or tarnishes the values of religion; and
5. Providing services that urges the public to commit a crime against the law, violence, misuse of drugs and other addictive substances, tarnishes the honor and dignity of mankind, violating decency and pornography, gambling, mockery, extortion or threats, defamation, hate speech, and violation to intellectual property rights.

6. The Obligation to Appoint a Representative Based in Indonesia for Foreign ESO

In accordance with Article 18 of the MoT 31/2023, Foreign ESO which meets certain criteria, must appoint a representative domiciled in the jurisdiction of Indonesia who may act as and on behalf of the ESO in question. Certain criteria for foreign ESO is with the following provisions:

1. has conducted transactions with at least 1,000 (one thousand) Consumers within a period of 1 (one) year;
2. has delivered at least 1,000 (one thousand) packages to Consumers within a period of 1 (one) year; and/or
3. has had traffic or access of at least 1% (one percent) of domestic internet users within a period of 1 (one) year.

7. Penalty of Not Registering ESOs

In accordance with Article 80 GR 80/2019 , ESOs Provider that does not register their ESOs can be given an administrative penalty in the form of warning letter, included in monitoring priority list or black list, temporary blocking of domestic ESO and/or foreign ESO services by the relevant authorized agency; and/or revocation of business license.

Gaffar & Co., an Indonesian Boutique Law Firm specializing and focusing on commercial law areas e.g. Capital Market & Financial Services.

Author: Christian Chandra and Oddy Ramadhika Susmoyo

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